The Need for Organizational Changes in Companies

Manana Kharkheli  Davit Gavardashvili

Journal number 1 ∘ Manana Kharkheli ∘ Davit Gavardashvili ∘
The Need for Organizational Changes in Companies

https://doi.org/10.56079/20221/7

In the context of globalization, it is becoming increasingly clear that implementing organizational change is a particular necessity for companies. The world is changing like lightning, the struggle between companies for dominance is intensifying, each company is trying to adapt to the new environmental conditions and take a firm position in the market; Therefore, it is necessary to make timely organizational changes. A company that ignores environmental variability and does not address organizational change is doomed to failure. In practice, in order for a company to overcome a crisis situation and achieve success, it must change.

Implementing organizational change is associated with certain difficulties; therefore, it requires effective management of the process. Effective management means using appropriate strategies and models for transformations. Management must be able to successfully make changes, as any action taken by them will affect both employees and customers. All of this will ultimately ensure the success of the company.

Organizational change is driven by a variety of factors. In some cases, changes in the environment have a positive effect. For example, technological development stimulates the company to make changes and innovate. Sometimes it negatively affects and restricts the activities of the company. Therefore, one of the main tasks of companies is to determine the driving force of change, to study comprehensively and to make the right decision.

The article discusses issues related to organizational change. The article describes the nature of organizational change, its types and the key elements that change can affect. In addition, the article discusses the drivers of change and the models through which transformations can be successfully implemented in companies. At the same time, the process of organizational change is analyzed on the example of a particular company.

Keywords: Management, organizational change, types of change, proactive and reactive behavior, models of change.

JEL Codes: D20, D21, D23

Introduction

In the era of technological development, processes are accelerating. The "rules of the game" are constantly changing in the business environment. Innovations are introduced, the competition between companies intensifies, and all this indicates that one, if not the only, correct and adequate action from businesses is the timely implementation of organizational changes, which require proper planning and management.

The importance of organizational change has increased even more in today's conditions (Covid-19). Covid-pandemic has dealt a severe blow to the business environment. Companies suddenly faced a new challenge. Many of them closed, some continued to operate with delays, and some made changes and adapted to new environmental conditions. Organizational change has become the most important mechanism for companies to survive and develop.

Organizational change is driven not only by external but also by internal environmental elements that determine a company's potential. With all this in mind, it is clear how important targeted organizational changes are for companies.

The aim of our research was to present organizational change as a vital and necessary tool in the activities of companies. Also, on the example of one of the Georgian companies, we discussed the organizational changes made by them and the management of implemented changes.

The Nature of Organizational Change and Its Peculiarities

Before making changes, it is important for management to properly evaluate the environment in which it operates and plan everything carefully, as one wrong step can completely worsen a company's situation. They should be well aware that the precondition for implementing organizational change should be a sharply articulated sole idea that the transformation carried out should substantially improve the company's position.

It is necessary to clarify what is meant by organizational change. In general, change involves transforming one state of an object into another state when the initial state changes to a new, improved state. Such a change includes a change in technology, as well as a change in economic or other factors that affect the performance of companies. It all pushes them to adapt to new environmental conditions. To do this, companies undergo changes that are administrative and are considered as "organizational changes".

The explanations about organizational changes offered by various scholars are quite interesting. For example, organizational change is defined by Moran and Brightman as "the process of constantly updating an organization's direction, structure, and capabilities to meet the ever-changing needs of external and internal users." (Moran & Brightman, 2000, pp. 66-74)

Organizational change can also be interpreted as "radical transformations in structures, personnel behavior, corporate values, and organizational arrangement." (Cummings & Worley, 2008, p. 506)

According to Garrett Jones, “Organizational change is the process by which organizations move from their current state to their desired state. The goal of planned organizational change is to find new or improved ways to use resources and opportunities to increase the efficiency of the company. ” (Jones, 2013, p. 273)

Thus, it is clear from the explanations offered by various scholars that they are not mutually exclusive but complementary. In practice, organizational change is the change of any particular element of the organization or the organization as a whole.

Companies apply organizational change for a variety of reasons. With this in mind, there are several types of changes:

Change for development
Transitional change
Transformational change (Anderson & Anderson, 2010, p. 60)

Change for development occurs when a company wants to further improve processes and the quality of work performed. With this change it tries to introduce technological novelties in advance and be prepared to meet the expected challenges in future.

Transitional changes are applied by the company when it needs to merge several functions to improve efficiency.

Transformational change is a fundamental change in the business model, the main goal of it is to make the right transformations in strategies and operations. Fundamental changes, at the same time, imply changes in staff behavior and thinking styles. For the most part, companies make fundamental changes when they go downhill and need to survive. Through transformational change, management seeks to revitalize the company.

Organizational change is usually aimed at improving efficiency in a variety of areas. Accordingly, transformations may relate to components such as:

Business model structure
Technologies
Human resources
Management structure
Organizational culture.

These components are interdependent and often a change in one of the components directly affects the other elements as well.

Factors Causing Organizational Change

There are various factors that cause organizational change: competition, legislation, technological development, economical conditions or other. All this forces companies to make changes themselves and adapt to environmental conditions. Sometimes change is forced, and sometimes management makes changes early to prevent it.

Change is proactive when the company believes that change is desirable without any pressure, and reactive when change is caused by internal or external forces. (Pierce, Gardner, & Dunham, 2002, pp. 627-657)

As already mentioned, organizational changes are caused not only by external but also by internal factors. Changing elements such as mission, purpose, structure, tasks, technology and people significantly change the organization's "agenda". All of the above are closely related and it is often impossible to change one component without changing the other. For example, a change in mission can lead to changes in goals.

The structure is the most important element of the internal environment. In practice, a change in organizational structure indicates the formation of a different approach, rules of procedure and processes. There are symptoms that indicate the need to review the structure and make some changes. for example:

When the company's management fails to respond in a timely manner to environmental conditions;
When management has difficulty delegating;
When there are fewer bottom-up initiatives;
When the series of actions is slow and decisions are difficult to make.

Thus, environmental conditions have a significant impact on the performance of companies. Consequently, management is required to study them, analyze each of them, and develop alternative variants of change.

Models for Implementing Organizational Change

Organizational change, as already mentioned, is an integral part of companies' operations. Given the fact that processes in the world are constantly changing, managers are required to make timely and concrete changes. The main question at this time is which model can be used to implement the changes. Since companies are different from each other, there is no one specific model that will be universal for all companies. However, there are models developed by different scientists that are actively used in business practice.

Below we discuss some popular models.

John Cotter Change Management Model
ADKAR model
Model of Kurt Levine
Larry Greiner model

The John Cotter model includes 8 stages and each component pays particular attention to employees and their response to change. These components are:

Convince employees of the need for change;
Forming a team with the qualifications needed to implement change;
Define future vision and strategies;
Constant communication with staff;
Creating appropriate conditions for active involvement of employees in the changes;
Celebrating the success achieved;
Strengthen the results and make the changes even more profound;
Timely introduction of changes in corporate culture. (Kotter, 2012, 22-23)

The peculiarity of this model is that it is constantly focused on communicating with staff and preparing them for change.

The second model, which is also often used in companies, is the "ADKAR" model. This is especially useful for companies, as it focuses on both the goals of the company and its employees. It pays special attention to the support received from employees in the change process. The ADKAR model is coded as follows:

Awareness ,
Desire
Knowledge
Ability
Reinforcement (Hiatt, 2006, 2),

Its main feature is to identify and evaluate the causes. The focus is on analyzing why the desired result is not being achieved, what is hindering the successful implementation of the changes.

One of the most popular models is the model developed by Kurt Levine, which consists of 3 main steps:

“Defrosting”
Implement changes
“Freezing” (Lewin, 1951)

The initial stage – “thawing” - is a preparatory step for change. At this time it is important to actively communicate with employees and explain that changes are necessary. This action is aimed at making employees, on the one hand, aware of the change process and, on the other hand, weakening their resistance. The second stage begins when management makes sure there is a willingness on the team to make changes. At this time, the organization makes changes, introduces new rules, changes approaches or the type of activity. This enables the company to move from the status quo to the desired one. Once the company gets the desired look, the third stage begins – “freezing”, which is necessary to maintain the changes and improve its efficiency.

It is important to touch on the model developed by organizational behavior researcher Larry Greiner, which consists of 6 stages.

Pressure and Encouragement - This initial stage indicates the need for change. Often, strong pressures cause particular concern about changes in the organization. Pressure can come from two sources. 1) from external factors and 2) from internal events such as low productivity, high costs, etc. All of this is easily seen by managers and during such periods they set sights on implementing changes.
Intervention of external consultants - Although management may understand the need for change, there is no complete guarantee that they will see specific problems and take the right steps to address them. The result requires the intervention of external consultants who can objectively assess the situation and assist the company in making changes.
Problem Identification - With the help of external consultants it is possible to identify specific problem areas. Problem identification starts at the top and moves down the organizational hierarchy. Once a problem is identified, senior management expresses readiness for change.
New Decision and Commitment - Once a problem has been identified and acknowledged, it is important to develop an effective solution and make a specific commitment to implement it. Sometimes it is difficult to solve the problem with traditional solutions, so it is necessary to "invent" new and unique solutions.
Experiment with new solutions - This stage represents a kind of "reality test" before large-scale change is introduced. At this stage, the validity of the decisions made in the 4th stage is checked. Decisions made at this stage are more seen as experiments rather than as final, irreversible solutions.
Adopt and strengthen change - One of the important goals of this phase is to convince the full staff of the organization of the need for change. In order for changes to be widely shared and have a positive outcome, employees are rewarded and encouraged. As a result, the employees themselves are trying to expand even further and continue to make changes. With such an approach, it is unlikely that organizations will return to past behavior. (Greiner, 1967)

Thus, it can be said that there are different models of change management. Despite their diversity, all of them are focused on the successful implementation of changes, the reduction of resistance from employees and the improvement of the overall condition of the company.

Analysis of Organizational Changes Implemented by

JSC "Georgian Beer Company"

Organizational changes were interestingly implemented in the company we studied. Changes made by management have made the company one of the dominant players in the market today.

JSC "Georgian Beer Company" was founded in 2011 and has made many changes to date. Some of them were caused by external, some by the influence of internal factors. Initially, the company only covered the beer-lemonade market. However, it later made significant changes to its portfolio and is now represented in the market with wide range of beverages. This required a factory equipped with modern technologies, which was owned by the company, but to further improve technological , the "Georgian Beer Company" had to make some changes in this regard. In particular:

Completely upgraded the production system and introduced the German-class KHS and KRONES technologies;
Tap lines upgraded;
Electronic measurement-control system was installed;
Aseptic technology was introduced;
The laboratory was renovated, equipped with modern equipment.

For the changes, the company was awarded a quality management certificate - "ISO 9000" and a food safety management certificate - "ISO 22000".

Changes in the country's political / legal factors provoked changes in the Georgian Beer Company. For example, an increase in excise duty in 2015 reduced beer consumption by 35%, besides that drinking in public places was banned. This forced the company to make changes to its pricing policy. This was accompanied by a deterioration in the economic situation, which made a change in prices inevitable.

In 2017, the Georgian Beer Company also made a strategic change, expanding its operations and purchasing the natural juice factory "Chero" for 7 million. This move further strengthened positions in the market.

The company has made numerous changes to the product category. If until now it operated only in the beer-lemonade market, today it is presented with a wide range of products. In addition, it has obtained licenses from international brands and launched various categories of beverages under its own brand. All this has increased the annual productivity of the company and today, it produces 90 million liters in the category of alcoholic beverages and 200 million liters in non-alcoholic beverages.

The company has made changes in terms of marketing as well. Namely: in 2018-2019, the beer "Zedazeni" was rebranded, the label was changed, the bottle design was improved and the product was presented to the customer with a new campaign.

As you know, the crisis caused by the Covid-Pandemic affected many companies and the Georgian Beer Company was no exception. Although company found the crisis situation unprepared, management acted quickly and actively began to make changes. It should also be noted that in practice Covid-Pandemic revealed where the Georgian Beer Company needed to make changes. The following changes were made during the Covid-Pandemic period:

ER ERP system was introduced - since the pandemic restricts the activities of employees, the company decided to make the processes fully automated, depending on the technological processes and not the staff.
From a strategic point of view, a change was made in export activities. Kovid-Pandemia made it clear that the local market was less purchasing power for it, hence the company decided to maximize sales to exports.
A change was made in the product as well. The company has launched a new beer under its own brand - "Cold-Cold".
Change in pricing policy as well. The cash-strapped fund significantly reduced the company's sales and revenue levels, making changes to product prices inevitable.
Covid-Pandemic made it necessary to make changes in the responsibilities and duties of the administration as well. The function of the administration to implement and control the recommendations imposed by the state has increased.

Through the changes made, "Georgian Beer Company" actively continues to operate in the market. Of course, change is accompanied by contradictions, but the company's management combines different strategies for change to eliminate it. First of all, the changes are discussed with employees before they are carried out. They are actively persuaded of the need for change and at the same time, employees are given the opportunity to participate in the implementation of the change themselves.

Georgian Beer Company has undergone many changes since its inception. The fact is that the changes made were successful. With the right management of the changes, the company was able to escape the crisis situation caused by the Covid-Pandemic and improve the situation.

Conclusion

In conclusion, we note that organizational change has become an integral part of managerial activities. Current trends in the world, the variability of elements of the internal and external environment constantly push companies to make timely and adequate changes. Each company is directed to adapt to world standards and improve the existing situation. This is natural and there is nothing surprising in that. If we consider the Covid-Pandemic, we notice that the significance of organizational change has increased even more. It has become the most important tool for escaping the crisis. The example of JSC "Georgian Beer Company" clearly shows how fundamental organizational changes are in the activities of companies, how necessary it is to make timely and result-oriented changes.

It should also be noted that effective management is crucial in the process of implementing change. Which means management should be aware of many different models before they carry out changes in the company. As mentioned above, there is no one universal model, so the manager must decide for himself which of them to use in a particular situation. It all depends on the management skills, as well as the current situation and the complexity of the problem. Before making changes, the manager should have a good understanding of issues such as:

What changes are taking place in the external environment;
How necessary it is to make changes in the company;
Which component of the organization needs change and what impact will it have on other factors;
What will be the reaction of employees to the changes;
To what extent will the rules of employee activity be in line with the newly introduced changes;
At what time interval changes should be made;
How can the implemented changes be further strengthened.

By answering these questions, the manager creates a kind of action plan aimed at making successful changes.

References:

Anderson L. A., & Anderson D. (2010). The Change Leader's Roadmap: How to Navigate your Organization's Transformation. San Francisco: Pfeiffer. p60
Cummings T. G. & Worley C. G. (2008). Organization Development & Change (9th ed.). USA: South-Western Cengage Learning. p506
Greiner L. E. (1967). Patterns of Organization Change. Harvard Business Review: Retrieved from https://hbr.org/1967/05/patterns-of-organization-change
Hiatt J. M. (2006). ADKAR: a Model for Change in Business, Government and our Community. USA, Colorado: Prosci Research Loveland. p2
Jones G. R. (2013). Organizational Theory, Design, and Change (7th ed.). USA: Pearson. p273
Kotter J. P. (2012). Leading Change. Boston, Massachusetts: Harvard Business Review Press. p22-23
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